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AT&T, Verizon face California PUC scrutiny over copper networks

AT&T (NYSE: T) and Verizon's (NYSE: VZ) management of copper networks are now facing an investigation by the California Public Utilities Commission (CPUC). Citing instances of substandard service quality, the CPUC voted 4-to-1 to examine the physical condition of the two telco's copper networks in the state.

The CPUC set a six-month timetable to conduct an examination of AT&T and Verizon's copper networks.

The CPUC added that "reliable, high-quality telecommunications services are crucial for the health of California's economy and the safety of California citizens."

A 2011 report cited concerns that AT&T and Verizon's copper networks were not meeting the "out of service restoration time" standard.

"The performance of Pacific Bell Telephone Company dba AT&T California (AT&T) and Verizon California Inc. (Verizon) has consistently failed to meet existing service quality metrics," said the CPUC in a filing. "In addition, the essential economic and safety functions performed by and through the network infrastructure and facilities of these companies are no less critical than they were when we first ordered the infrastructure evaluation."

In particular, the CPUC said it is concerned about residential and business customers' ability to contact emergency services.

AT&T and Verizon said that the need for a new alternative proposed decision on the quality of their copper networks is not necessary.

"AT&T specifically states that the APD "cites the wrong measure for its conclusion" and argues that "based on the APD's own logic, but referring to the correct measure, the network study should not proceed at this time," said the CPUC citing the telcos. "Verizon asserts that the APD improperly relies on facts and incidents that are not directly related to the AT&T and Verizon network, in its discussion of the need for the study."

This investigation comes at a crucial time for Verizon, which is in the process of selling off its wireline facilities to Frontier Communications in California. The two service providers recently got the FCC's approval of the deal and they expect it to be completed in the first quarter of 2016 after receiving remaining state regulatory approvals.

In related news, the Communications Workers of America (CWA) union has asked that federal and state regulators in the 11 states where Verizon operates wireline networks investigate its claims that the telco is not performing necessary repairs and upkeep on its copper landline networks. It has filed letters to regulators in six states and Washington, D.C.